Crédit Agricole Writes Down €3.3bn From Credit Crunch

Crédit Agricole (CA), France's "green" bank, plunged to a net loss of €857m (£656m) in the final quarter of last year, writing down €3.3bn because of the crisis in financial markets, it said yesterday.

The bank, which saw its annual net income in 2007 drop 17% to €4bn, reassured investors, however, by saying it planned no "significant new" acquisitions and saw little or no reason to prepare for further write-downs.

Shares in the group rose 5.5% as the bank said its majority shareholder, SAS La Boétie, had already endorsed the option of taking 80% of the proposed dividend of €1.20 in new shares and talked up a strong underlying performance with no liquidity problems despite the credit crunch.

CA has indicated that it could be interested in buying parts of its rival Société Générale if SocGen, which suffered even heavier losses in the fourth quarter of 2007 - including €4.9bn through the rogue trader Jérôme Kerviel - went on the block or accepted government pressure for a "Franco-French" merger. BNP Paribas, France's biggest bank, has also signaled its interest.

But, amid evidence that President Nicolas Sarkozy has overplayed his hand, SocGen has remained stubbornly independent.

CA's chairman, René Carron, said the group would make organic growth its priority. It was not considering "any significant new acquisitions".

But Georges Pauget, chief executive, said CA would "not remain indifferent" if another bank moved on SocGen. Sources suggested CA was still keen to acquire SocGen's domestic branches if any disposal arose, rather than its scandal-hit investment banking arm.

CA's own investment banking business, Calyon, wrote down €3.3bn in the final quarter, compared with an estimate of €2.5bn given in late December.

It outlined a €1.2bn impairment for unhedged super-senior collateralised debt obligations related to the US mortgage market and €2bn to mono line insurers, including €800m to ACA.

The division, representing a third of CA's business, recorded an operating loss of €1.7bn last year which, the bank said, would have been a profit of €2.4bn without the crisis. Overall, it said, net banking income rose 3.6% over the year to €16.8bn.